The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This usually takes places on different exchanges or marketplaces.

Here's an example of arbitrage: Say a domestic stock also trades on a foreign exchange in another country, where it hasn't adjusted for the constantly changing exchange rate. A trader purchases the stock where it is undervalued and short seels the stock where it is overvalued, this profiting from the difference. Arbitrage is recommended for experienced investors only.